Wednesday, 11 November 2015

Rising to the challenge

We have a housing crisis. On just about every indicator, the direction of travel is wrong.
Housing costs as a proportion of earnings remain unsustainably high. We are spending 1.4 per cent of UK GDP on subsidising housing costs, compared with 0.14 per cent in Germany. UK housing benefit has doubled in a decade to £24.2bn.

Last week, Conservative Housing Minister Brandon Lewis claimed that his Housing and Planning Bill will  kick-start a national crusade” that will “get one million homes built by 2020” and “help deliver the homes hard-working people rightly deserve, transforming generation rent into generation buy”. 

It’s nonsense. You should put even less faith in Lewis’s claim than that of his predecessor, Grant Shapps, who told me in 2010 that “Building more homes is the gold standard upon which we shall be judged”, before going on to deliver a post-WW2 record low of 135,500 new homes in 2012/13.
Meanwhile, David Cameron proudly proclaims his new Starter Homes’ initiative. These are set to cost no more than £250,000 outside of London and £450,000 within London.  Starter homes at £450,000? Cameron thinks that this is ‘affordable’? Only on Planet Eton! It’s no wonder that ordinary people think politicians are out of touch.

Cameron and Lewis have plucked a promise of “1 million new homes in this Parliament” out of mid-air. Let’s be clear; there is no chance of this being achieved, let alone the 250,000 minimum housing starts required each year, without a significant investment in social housing which is essential to meet housing needs as well as economic objectives. But Cameron, for ideological reasons alone, has set his face against social housing with his latest hugely subsidised right-to-buy scheme for housing associations. 

Tackling the housing crisis requires some radical interventions. Simply building more homes will not redress the problem of absurdly high house prices fuelled by the absurdly high cost of land.
Where planning permission is given for housing, it’s the public purse which should benefit from increase in value. This principle was enshrined in the 1947 Planning Act. The landowner would receive the current use value plus a helpful top up but not the windfall bonus of today’s system.
Denmark and Germany have led the way in addressing the challenge of brining housing land in to use at lower prices, using land value taxes and planning powers. It’s little wonder that they can deliver house-building rates double or treble ours, whilst cutting the cost of housing. If they can do it, so can we.

Building enough new homes is a huge challenge. Getting a fair deal for taxpayers is an even bigger challenge. Land value reform now has to be on the agenda.

Tuesday, 10 November 2015

Steeling ourselves

Between 1979 and 1984, Sheffield lost more than 50,000 jobs in steel and engineering – more than the whole of the UK coal industry lost in any 5 year period. We understand the devastating long-term impact that such changes have on the whole economic, social and environmental status of a community. 

With major changes in the technology of steel-making, the location of raw materials, costs of energy, production capacity and patterns of demand, it was inevitable that there would be massive implications for the UK steel industry. The key political issue was not about change itself but about how such change was managed. 

For Margaret Thatcher’s government, wholesale redundancies and the destruction of local economies were seen as ‘the price worth paying’. To add insult to injury, Thatcher then blamed the victims and used that as a justification for minimising investment in managing the transition. It is little wonder that anger about those policies is so ingrained in Sheffield, South Yorkshire and other communities which were similarly affected.

As a matter of interest, a few years’ later I visited Anshan – Sheffield’s twin city in China – which is dominated by coal and steel production. I met the small team from Davy’s (now DavyMarkham) in Sheffield who were installing some modernised plant to improve efficiency in the steelworks. They explained that the plant they were installing was by no means cutting-edge; it was 20 year old technology. However, its installation would ‘only involve the redundancy of about 10,000 steelworkers, which was the maximum number that it was felt could be redeployed and retrained over the course of the next year’. In other words, continuous improvement in efficiency and effectiveness, but at a pace which could be managed. 

Let us roll forward to today with is devastating news that the decision to end 170 years of steelmaking in Redcar has resulted in 2,200 direct job losses, 1,000 onsite contractors have been laid off, and 6,000 job losses are expected in the local economy. The decision by TATA Steel to close its Long Products business has resulted in 900 jobs being lost in Scunthorpe, and the closure of plants in Dalzell and Clydebridge in Scotland, with 270 job losses. Caparo Industries have also filed for administration which puts at risk 1,700 jobs across the country.

In addition to the immediate job losses, the British economy can ill-afford further loss because steel is fundamental to a number of important sectors in which the UK is world-leading, including aerospace, automotives, defence, construction and energy infrastructure.

The industry faces a number of key challenges which can only be overcome by adopting a co-ordinated and active industrial strategy for steel, aimed at securing a long-term future for the industry. The industry is also being adversely affected by Chinese dumping of low-price steel.
But, this Conservative government has not only been sleeping on the job, it is reluctant to become involved at all. The Business Secretary has made it clear that he is ideologically opposed to having an industrial strategy. The contrast with Germany and other European steel producers is dramatic.
To my mind, it is absolutely clear that Government needs to rethink its approach and take an active role in supporting industry and high skilled jobs. These are the actions that the Government, as a minimum, should be taking:

First, implement immediately the Energy Intensive Industry Compensation Package, which would address the high energy costs the sector faces; UK energy prices are far higher than our European competitors face, let alone those in SE Asia and S America;

Secondly, take action to stop low-cost dumping. The Government must work with the EU Commission to back anti-dumping measures and review how effectively the Commission responds;
Thirdly, the Government should explore what other support the industry could be offered, including temporary action on Business Rates, reviewing how regulatory frameworks impact the industry, and promoting local content and sustainability in procurement contracts.

Fourthly, as a matter of long-term security, we should ensure that the UK continues to have the ability and capacity to produce a minimum amount of steel for the UK economy.

Fifthly, we need an urgent assessment of the impact of the loss of bulk-steel production on the long-term prospects for the production of specialist steels and alloys and engineered products for which the Sheffield City Region is renowned.